China’s perceived level of influence over Latin America questioned in Stanford expert’s research

The economic relationship between Latin America and China has expanded dramatically since the beginning of the 21st century. Although slowing recently, China’s appetite for Latin America’s commodities appeared insatiable to experts who study the region, and Chinese manufactured goods flooded markets in Latin America in return.

Stanford scholar Harold Trinkunas has explored China’s influence over Latin American countries and found less to worry about than many people fear. (Image credit: Rod Searcey)

Growing economic ties have provoked a debate in the U.S. policy community over whether China’s expanded role in the region’s economies has the potential to undermine the relationship between Latin America and the United States and Latin America’s gains on democracy, human and labor rights and the environment.

Harold Trinkunas, a senior research scholar and associate director for research at Stanford’s Center for International Security and Cooperation, investigated this relationship’s evolution from 2000 through 2016 and found that China doesn’t appear to have as much influence over Latin American countries as some people believe. He recently published these findings and recommendations on this subject to policymakers in a report at the Brookings Institution in Washington, D.C.

“There is an argument in Washington that China’s more prominent role in Latin America is bad for the region and bad for the United States,” said Trinkunas, who is also a nonresident senior fellow at the Brookings Institution. “I find instead that the China-Latin America economic relationship is largely win-win and the scope for detrimental Chinese leverage on Latin American governments is limited to a small number of vulnerable cases.”

A partnership that makes sense

China’s rapid growth and its need for commodities led to a natural strengthening of its ties with Latin American countries, which in turn need the investment and construction in infrastructure that China can provide.

About 13 percent of the region’s total global trade is now done with China, whereas in 2000 that number was almost negligible. In 2013, loans from Chinese policy banks had exceeded those provided by the region’s traditional partners, such as the World Bank and Inter-American Development Bank.

But despite this growing relationship, most Latin America governments do not solely depend on China’s investment and trade.

If all of South America is considered as a whole, China, the United States and Europe make up about a quarter each of its total trade. When Mexico is included, Latin America trades nearly four times as much with the United States as with China.

“China so far lacks the extensive set of relationships with domestic political actors that would allow it to indirectly influence domestic policy of Latin American governments,” Trinkunas said. “Most Latin American countries have options when it comes to trade, investment and capital.”

Cases of vulnerable states

A few countries, including Venezuela, Ecuador, Suriname and Guyana, are more susceptible to influence by China because that country is their main source for foreign direct investment and they have limited access to alternatives, such as international capital markets. But Trinkunas argues that those countries became vulnerable because of their own poor domestic policy choices.

In vulnerable cases, China’s trade and investment leverage led to some policy changes in these countries, principally to allow imports of Chinese labor and preference for Chinese companies in government contracts. For example, Argentina, which defaulted on its international debt obligations in 2002 and had limited access to capital markets until 2016, became an important destination for Chinese trade, investment and loans. The Argentine government under President Cristina Fernández de Kirchner gave China favorable treatment, including a free, 50-year lease of land to build a space monitoring station under an unequal arrangement that allowed Argentina to use the facility only 10 percent of the time.

But these changes do not necessarily achieve lasting political change in vulnerable countries, Trinkunas said. When a new administration was elected in Argentina in 2016, that contract was renegotiated. “The new Argentinian administration made changes that led to a more equitable relationship with China,” Trinkunas said. “This shows that things can change really fast.”

Looking ahead

Going forward, the United States should ideally focus on expanding its trade ties through treaties such as the Trans-Pacific Partnership (TPP) and use this to bolster its relationship with Latin America more broadly, Trinkunas said.

“U.S. policy makers should be skeptical of the threat-based narrative that China is competing with or excluding U.S. influence from the region,” Trinkunas said. “A growing Chinese economic role in Latin America is a natural outcome of China’s changing role in the global economy. Also, Latin America badly needs infrastructure, and China is very good at building it. The relationship is not necessarily bad for Latin America or for the United States.”

At the same time, Trinkunas said it’s uncertain how the future will look when President-elect Donald Trump takes office. Trump has indicated he would like to renegotiate TPP and has referred to the North American Free Trade Agreement (NAFTA) as “a disaster.”

“If those deals get renegotiated, there will be a question mark as to whether trade with the U.S. will continue to play as important a part in the region’s economy,” Trinkunas said, “Certainly, the United States will lose one of its principal avenues for strengthening U.S.-Latin America relations.”

The research was supported by the Director’s Strategic Initiative Fund of the Foreign Policy program at the Brookings Institution.